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classification at the Effective Date. The COD has been
allocated to the partners based upon a formula
developed with the IRS. If no Closing Agreement is
entered into, the Trustee may amend the return to
reflect an alternative position with respect to the
timing of recognition of COD income.
Mr. Blonien received a Schedule K-1 from Finley Kumble for
1992, indicating that his distributive shares of Finley Kumble
items were as follows:
Distributive
Partnership Item Share
Ordinary income (loss) ($1,252)
Interest 127
Net long-term capital gain (loss) (8)
Sec. 1231 gain (loss) (10)
Income from cancellation of debt 37,212
The Schedule K-1 indicated that Mr. Blonien had a 0.0170-percent
interest in Finley Kumble’s profits and losses, and a 0.0345-
percent interest in Finley Kumble’s capital. The Schedule K-1
also indicated that Mr. Blonien had a yearend negative capital
account of $13,717.
On October 15, 1993, pursuant to extensions, petitioners
filed their 1992 Federal income tax return, which respondent
received on October 20, 1993.
Petitioners reported $2,000 of COD income from Finley Kumble
on line 22, page 1 of their 1992 return as follows: “Other
Income. COD INCOME FINLEY, KUMBLE ET AL 2,000”. Other than this
$2,000 reported on the face of the return, petitioners did not
account therein for Mr. Blonien’s distributive share of items
from Finley Kumble or his negative capital account or include any
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Last modified: May 25, 2011